Verbatim report of proceedings

Tuesday, 14 December 2010 - Strasbourg

15. Credit rating agencies (debate)

  President. The next item is the report by Mr Gauzès, on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 1060/2009 on credit rating agencies (COM(2010)0289 - C7-0143/2010 - 2010/0160(COD)) (A7-340/2010).

  Jean-Paul Gauzès, rapporteur. – (FR) Mr President, Mr Chastel, Commissioner, here we are in the third act of the financial legislation for 2010. Following supervision, following the directive on alternative investment fund managers, we are once again looking at credit rating agencies. I say ‘once again’ because Europe has not been slow in bringing in a regulation in this area which was conceived in 2009 and which is now taking effect.

Credit rating agencies, in general, issue opinions, literally in the form of ratings, on the creditworthiness of businesses and states and on complex financial products. The rating reflects an assessment of the risk of issuers of financial instruments not being able to honour their debts. These agencies have gradually become very important in the financial world, for a variety of reasons.

First, ratings are taken into account in banking regulations in order to determine the amounts of own funds that will be used to back investments. The second reason is that ratings have been a factor in the success of issues, since they have become a major indicator for investors.

Yet, although credit rating agencies were not the main cause of the recent financial crisis, they did have a harmful influence. Indeed, they underestimated the probability that issuers of certain complex financial instruments would default.

Faced with the need to restore confidence in the markets and to strengthen protection for investors, in 2009, the European Commission proposed a mechanism for monitoring and supervising credit rating agencies. Thus, in the same year, Regulation (EC) No 1060/2009 on credit rating agencies was adopted.

During the debates in the European Parliament preceding the adoption of this regulation, your rapporteur stressed the need for EU-wide joint oversight of credit rating agencies’ products and integrated supervision of them. At the time, European supervision of this type was legally impossible. However, the Commission undertook to draft a legislative proposal along these lines, and you, Commissioner, kept this promise.

The agreement reached between the Council and the European Parliament on the architecture of European supervision, which will enter into force on 1 January 2011, now makes the effective implementation of rating agency supervision possible.

It is stressed in the Regulation establishing the European Securities and Markets Authority that this authority will exercise its own supervisory powers in relation, in particular, to credit rating agencies. That was the objective of the additional amending regulation on which we reached an agreement and on which we will vote tomorrow.

What I wanted – and my colleagues supported this request – was for the other issues relating to credit rating agencies, allocation of sovereign debt, remuneration schemes and competition, to be postponed and dealt with in a study taking the form of an own-initiative report, which will precede the legislative proposal that you are due to make in the first half of 2011 and for which you have launched a consultation.

I believe that, by establishing European supervision of credit agencies, we are taking a big step along the same lines as the supervision arrangements that have been implemented. I now want to thank the Belgian Presidency for its tireless efforts on the financial dossiers, you and your teams, Commissioner, and, obviously, my fellow Members in the European Parliament who participated in this study and who supported our positions.

  Olivier Chastel, President-in-Office of the Council. – (FR) Mr President, Commissioner, ladies and gentlemen, after Mr Gauzès and a report of this kind, it is clearly a pleasure to be among you on behalf of the Belgian Finance Minister, Didier Reynders, on the day of the debate concerning the amendment of the regulation on credit rating agencies.

Once again, as you have just said, we are talking about a measure relating to financial services on which the three institutions have just reached an agreement in record time.

We are also very pleased that this agreement will be voted on in Parliament tomorrow, as agreed, between the three institutions.

The regulation will therefore be modified to allocate additional powers to the European Securities and Markets Authority. This will allow the authority to exercise stricter supervision of the activities of credit rating agencies throughout the Union. This is an important step which we also think will contribute to improving the stability of the financial markets, and which will support the development of a much more effective supervisory framework.

Once the regulation enters into force, therefore, the authority will have powers concerning the registration and direct supervision of credit rating agencies. It will also have the power to determine that a credit rating agency has infringed the regulation in force and the power to impose appropriate penalties.

Of course, a framework will also be provided for cooperation between the competent authorities in the Member States and the European Securities and Markets Authority. However, we are prepared to have a more in-depth debate on the issue of regulating the credit rating agency sector itself once the Commission has provided us with its proposal on the comprehensive review of this sector, which is set for next year. While I am obviously hoping for a positive result from your vote tomorrow, I would particularly like to thank the Chair of the Committee on Economic and Monetary Affairs, Mrs Bowles, Parliament’s rapporteur, Mr Gauzès, and its shadow rapporteurs, of course, as well as Commissioner Barnier, who, alongside the Belgian Finance Minister, Mr Reynders, carried out important work for six months, securing swift agreements that have been transformed in this very Parliament into real decisions in the financial sector. Anyway, thank you for your fruitful and effective collaboration in this area. I am sure that you will continue this work during the Presidencies to come.

  Michel Barnier, Member of the Commission. – (FR) Mr President, good afternoon to you all. You spoke very well, Mr Gauzès, as did Mr Chastel just now, on behalf of Mr Reynders, about the supervision and regulation of the large hedge fund and private equity sector, today, and about this second stage of credit rating agency regulation, tomorrow, which is clearly being undertaken with and thanks to you, ladies and gentlemen, and thanks to the Council and to the initial work of the Commission. On the subject of regulation, Europe is making concrete and effective progress, and it is learning the lessons of the crisis, as all taxpayers, who are also European citizens, are demanding.

Ladies and gentlemen, the agreement on the supervision of credit rating agencies is an important step, and I, too, would like to thank you, Mr Gauzès, and, of course, those working alongside you, the Committee Chair, Mrs Bowles, as well as the shadow rapporteurs, Mr Klinz, Mr Giegold, Mr Pittella and Mr Fox. In a few days’ time, this Presidency will come to an end, having had much success and having made a lot of progress, and I want to give my sincere thanks to Mr Reynders and to his whole team for the good relations we have maintained throughout the last six months.

This is a good agreement, even though I have to say that it would have been excellent if, in the final compromise, we had taken up the rules that the Commission initially proposed for reinforced transparency regarding structured financial instruments. However, as was indicated in the recitals of the regulation, we will come back to this subject, if you wish, during the next revision of the regulation in 2011.

As Mr Chastel said just now, from July 2011, this amendment to the 2009 regulation will give ESMA, the new Securities and Markets Authority, the direct power to supervise credit rating agencies at European level. Ladies and gentlemen, the importance of this decision that you are taking today really must be understood. This is the first time that ESMA, this new European authority, will have the power to directly supervise financial institutions operating across Europe.

This amendment completes the new European supervision framework. It strengthens ESMA’s powers considerably, as you explained very well, Mr Gauzès, and as Mr Giegold, who is here, was also anxious to point out during the debate on supervision. This is therefore a very important subject for you, and it is also a very important subject for us.

ESMA will become the institution responsible for registering rating agencies and supervising them throughout the Union, and it will exercise strict control. The legislation will grant it all the supervisory powers deemed necessary to force rating agencies to comply with the terms of the regulation.

ESMA will be able to exercise supervision – I am thinking here of requests for information and the power to carry out spot checks – and if it notices that a credit rating agency is committing a violation, it will have to take the measures necessary to force the agency to put a stop to that violation. ESMA will also have the power, strictly regulated by clear rules, to impose fines and penalties on rating agencies which do not respect the regulation. Clearly, this regulation also guarantees the rights of defence of rating agencies, in particular, the right to a hearing, access to documents and other procedural guarantees. Finally, when exercising a supervisory power, ESMA will respect the rights enshrined in the Charter of Fundamental Rights and the other principles and provisions of European Union law, including the proportionality principle.

The new regulation on rating agencies will also ensure a single point of contact for all rating agencies, a regulatory framework which is harmonised across the European Union, with equal treatment, and a more consistent application of the rules for agencies throughout the European Union.

I therefore think that this represents a considerable gain in efficiency, transparency and security within the general architecture that we are constructing week by week in order to achieve intelligent supervision and effective regulation.

Mr President, I do not want to speak at great length as I did just now, but I would perhaps like to expand on what Mr Chastel said and mention the next stage, since I myself said that we must go further to ensure the proper regulation of rating agencies, while noting that the agencies are not creating the problem and the turbulence on the financial markets. The thermometer does not cause the fever, but it still needs to work properly, which was not the case in the past, and that is what we want to remedy, so to speak, with these successive regulations.

The Commission is already considering the next stage: a public consultation was launched on 5 November 2010 to broaden this debate and to collect the points of view of all the parties concerned, and, as you know, there is nothing artificial about the debates regarding all these regulations. Ladies and gentlemen, I truly set great store by listening to every contribution, criticism or idea made in the context of these consultations.

We shall now consider, first, the consequences of the issuer-pays model, which is widespread among rating agencies; second, the dependence of the banks and other institutional investors on credit ratings; third, the rating of sovereign debt – which is not a straightforward matter; fourth, increasing transparency in order to manage conflicts of interest better; and fifth, creating more competition and diversity in this rating agencies market, which is currently concentrated in too few hands.

This consultation is open until next January and, on the basis of all the responses that we receive, and of Mr Klinz’s own-initiative report, we will take a decision at some point in 2011, but not too late, regarding the measures that we want to implement in order to complete, through a third stage, these two regulations on rating agencies, which are now almost implemented.

  Sebastian Valentin Bodu, rapporteur for the opinion of the Committee on Legal Affairs. – Mr President, as a Vice-Chair of the Committee on Legal Affairs, I would like to present some important aspects that were the subject of the debates and amendments tabled in this committee.

Firstly, at the present time, payment for the structured instruments evaluated by the agencies is made by the issuing company. There can be conflicts of interest because the rated companies are interested in having a good rating. Alternatively, it might be the users of ratings who pay. The users’ interests are more diverse and therefore, there is not a single interest that can lead to a conflict of interest. There are users who prefer a good rating, for instance, when they want to sell shares, and those who prefer a bad rating, for instance when they want to buy shares.

Secondly, the regime for the rating agencies could profit from the rules that have been established for the auditors. The rating agencies and auditors have a lot of responsibility for the good reputation of companies and the proper functioning of the market. Auditors, however, seem to be subject to far stricter rules than the rating agencies.

Thirdly, the European Securities and Markets Authority, ESMA, should have supervisory competence over the credit rating agencies in order to verify possible material discrepancies between the ratings given by different agencies for the same structured financial instrument. ESMA should also have greater power of enforcement.

Fourthly, the directive introduces a new principle, taken from the latest US legislation. When an agency other than the one contracted to make the valuation can do its valuation for the same instrument, it is subject to the contracted valuation. For this, the first agency must disclose certain information regarding the valuated instrument. In such a way, two beneficial effects are obtained – firstly, there is a second opinion and, secondly, the liability that falls on the contracted agency is reduced.

Finally, I want to underline the fact that the provisions of this directive, which represents a new regulatory frame, should only apply to the structured financial instruments, credit rating agencies themselves being an important part of structured finance. The remainder of the financial instruments, 150 year-old common shares or plain bonds which do not pose a systemic risk should not be part of this directive if you want to be tight but not to over-regulate, if you want to be competitive but not expensive in administrative costs, and if you want to hold capital in Europe and not drive it away to the emerging markets abroad.

  Gianni Pittella, on behalf of the S&D Group. – (IT) Mr President, ladies and gentlemen, thanks to our now tried-and-tested cooperation, we have worked productively with Mr Gauzès on this regulation to ensure some important advances in the rules governing one of the most controversial areas for the stability of the financial markets.

One such improvement is undoubtedly the plan for the newly formed European Securities and Markets Authority (ESMA) to be able to directly penalise credit rating agencies for misconduct. This was a point that I very much insisted on. Parliament is showing in this way that it is fighting for the creation of a strong European supervisory body that is equipped with real powers.

We are also aware that this regulation still does not tackle all the problems in a sector which, in recent years, has been seen to have exacerbated the crisis. The stumbling blocks to be overcome, which are the subject of a parliamentary report already being drafted by Mr Klinz, concern two issues in particular: the evaluation of Member States’ sovereign debt and the general structure of a market characterised by an obvious oligopoly.

The European Union must have a clear objective in relation to these issues, namely, to make finance less dependent on ratings. The references currently contained in the laws and regulations on credit rating agencies must be superseded by alternative creditworthiness standards. The United States and the G20 have already gone in that direction.

At international level we need to have the courage and the ambition to change the rules underpinning Basel II, by which I mean the obligation to use ratings – a mechanism that has actually led the banking sector, in the past and still today, to completely give up on supervision, the consequences of which are plain to see.

I shall conclude with a brief reference to the issue of sovereign debt rating: this should no longer be the responsibility of credit rating agencies, because too often they have exasperated market sentiment with their ratings, fuelling speculation. We should give thought instead to the possibility of a European institution – perhaps an existing institution, such as the European Court of Auditors – playing a role in this area.

I really do hope that my suggestions will be endorsed by my fellow Members and will receive the full, authoritative support of Commissioner Barnier, for whom I wish to reiterate my high regard.

  Wolf Klinz, on behalf of the ALDE Group. – (DE) Mr President, Commissioner, ladies and gentlemen, in a few weeks’ time, we will have a new supervisory structure in Europe, which has been shaped to a considerable extent by the European Parliament. Among these three new supervisory authorities will be one that is responsible for markets and securities: the European Securities and Markets Authority (ESMA).

ESMA will have the last word in connection with the registration and oversight of credit rating agencies and be responsible for ensuring that the credit rating agencies actually comply with the new regulations. If it so wishes, ESMA can delegate this cross-border responsibility to national supervisory authorities if these supervisory authorities are small and only operate nationally.

This proposal is therefore nothing more than an adaptation of the regulation of April 2009 to the new circumstances, but it strengthens the role of ESMA. It gives the new supervisory authority more powers and – something that is completely new – it gives ESMA the power to punish non-application of the regulation. I very much welcome this, because I believe that strengthening the position of a new supervisory authority of European mould will genuinely increase its credibility on the market.

I just have one point of criticism. When drawing up the regulation in April 2009, we took a political decision with regard to how we should deal with ratings from third countries in Europe. We said at that time that they can be used in Europe if they either comply with the equivalence procedure or are supported by a credit rating agency that is registered and approved in Europe, the so-called endorsement procedure.

The Commission has now changed this at level 2 and said that endorsement will no longer be possible. Therefore, only the equivalence procedure actually applies. I consider this – as it was undertaken unilaterally – to be an undemocratic way of going about things, and I believe that we should stick to the decision that we made at the time in April 2009.

As the Commissioner also mentioned, there are still a lot of outstanding issues where credit rating agencies are concerned, namely, the lack of competition, insufficient transparency, the business model as to whether the issuer or the investor should pay, which need to be looked at critically. There are questions with regard to the payment system and also with regard to excessive dependency, because in reality, it is the case that, as a result of regulatory provisions, many ratings agencies have become de facto regulatory certification authorities. I am taking this up in the own-initiative report, and I am pleased that the Commission is going to table a legislative proposal on this matter in the next year.

  Sven Giegold, on behalf of the Verts/ALE Group. – (DE) Mr President, Mr Chastel, Mr Barnier, Mr Gauzès, ladies and gentlemen and shadow rapporteurs, I am indeed pleased that we have now taken this step and that for the first time, a sector of the European financial system will be placed under direct European supervision. It is also a step towards a strong Europe in an internal market and the firm control of a sector that contributed to the crisis. I would like to make one more comment on this. Mr Barnier, the selection process is, of course, currently under way for the new authorities, and the new authorities are only as good as their staff. I can only hope that the staff will genuinely be selected on the basis of expertise, independence from the financial industry that they are to control and the clear desire to serve in the public interest, and that we will not see national quotas again in the selection process that disregard these important criteria.

In addition, we still have a great deal to do in the area of credit rating agencies. We still have no real transparency when it comes to the information with which the credit rating agencies work and there is far too great a use of regulatory ratings in the financial sector and in the regulations governing the financial industry. We have serious conflicts of interest, we quite clearly have a market power of three major providers and there is no liability for negligently issued ratings. Commissioner, it is good that the consultation is now under way and we await the results with interest. Civil society, in particular, should be involved in this consultation, but then you need to put forward a courageous proposal. I am already looking forward to your proposal. Please be as courageous as you have been up to now, and let us produce legislation together during the next year that solves the problems that are still present on the credit rating market in a genuinely European way. We owe this to our citizens.

  Ashley Fox, on behalf of the ECR Group. – (FR) Mr President, I would like to thank Mr Gauzès for his excellent work on this subject. I am pleased that Articles 8a and 8b were removed during the trialogue. Initially, the Commission’s draft proposed creating secure websites. I was never convinced. We can see how the situation unfolds in the United States, and if the sites turn out to be useful, we can always introduce them here in Europe afterwards.

Mr President, I am delighted to inform you that my group will vote in favour of this report tomorrow, and I thank Mr Gauzès once again.

  Jürgen Klute, on behalf of the GUE/NGL Group. – (DE) Mr President, Mr Chastel, Mr Barnier, ladies and gentlemen, the last few months since the beginning of this year have shown the damage that credit rating agencies can do. There is therefore an urgent need for action. I, too, therefore welcome the directive, in particular, the fact that the supervision and registration of credit rating agencies will be transferred to ESMA. That is an important and positive step in the right direction.

However, numerous good and progressive proposals fell by the wayside during the negotiations on the report. I would like to mention this once again. Thus, the appointment of ESMA remains the only real and positive change. The proposals for a public database for the issuing of credit ratings have been dropped, as has any reference to the establishment of a public credit rating agency. The consistent and continual examination of issued ratings by the supervisory authorities has also been forgotten about. Moreover, the Commission had proposed the promotion of unsolicited credit ratings in order to deal with the disastrous issuer instructions for the evaluation of financial market products. This, too, has come to nothing.

I hope that these aspects will be taken into consideration in the reports on this matter that are still to come and that were mentioned by Mr Gauzès and by you, Mr Barnier.

  Hans-Peter Martin (NI). – (DE) Mr President, Commissioner, we are nearing the time of fervent prayers in light of today’s news, once again concerning the euro, for which we are grateful. I very much hope that, with your courageous approach, you will not be too far behind the times. I would like to endorse what the previous speaker said and ask you urgently to ensure, in your sphere of influence, that selections will not only be made on the basis of national quotas, but also that party political preferences will be put aside so that we can finally break with a very awkward tradition in connection with officials, which is specific to Europe, and actually bring in the best people.

My second request is for much greater transparency with regard to the competitors on the international market outside the EU, which have constantly made a political issue out of their ratings and have suggested that they have an omniscience that in no way corresponds to what is actually happening on the market or even their importance.

  Ildikó Gáll-Pelcz (PPE). – (HU) Mr President, Commissioner, Mr Gauzès, ladies and gentlemen, it is truly a great pleasure for me to note that Mr Gauzès has created such an excellent report. The topic is of extreme importance, and looking at the habits and operation of credit rating agencies, it always has relevance. The rapporteur’s effort to ensure that credit rating agencies and their products are controlled in an integrated way, on the basis of uniform EU standards, deserves support. However, it is important to know what exactly is being rated and how. We must ask these questions, as it is common knowledge that prior to the crisis, these credit rating agencies gave excellent ratings to several thousand billion dollars worth of doubtful or bad securities, thereby unfortunately providing unlimited ground for speculation.

First of all, we must examine the issue of independence, because if it is true that banks and certain investor groups are financing the fees of the evaluations, we might ask the question whether the decisions of credit rating agencies are indeed free of external interests. The second issue is the methodology of ratings. The third issue is that with concerted downgrades and negative rumours, any country can be made insolvent, and in this way, it can be forced to take out new loans and thus remain an increasingly vulnerable client in the debtors’ market. Small, open economies and Member States outside the euro area are particularly vulnerable.

I am therefore convinced that it is incorrect to accept that credit rating agencies are not responsible for the ratings they give. Ladies and gentlemen, let us put ratings in their appropriate place, and rely on them only to the extent of their credibility, and consider them as guidelines when establishing the regulatory framework. The report is more than worthy of support. The global economic crisis has shown that the regulation and EU level supervision of the operations of these institutions are necessary.

IN THE CHAIR: LIBOR ROUČEK
Vice-President

  Evelyn Regner (S&D). – (DE) Mr President, Mr Chastel, Commissioner, credit rating agencies played, and are still playing, a dishonourable role in the financial crisis. There are too few of them, they are too powerful and too lacking in transparency, and their structure and importance is an example of how badly things have gone awry with our global financial system.

Confidence in credit rating agencies can only be restored by establishing new, sound rules for them. Tomorrow, we will vote on one step in this development, the necessary adaptation of credit rating agencies to the new European financial market supervisory structure and adaptation to the new comitology procedure, the delegated acts.

ESMA will be brought into being. It is authorised to permanently revise ratings, carry out a thorough inspection of credit rating agencies and also to impose penalties that are higher than the profit gained from breaking the law. All of these are new developments that are, as a minimum, absolutely necessary.

However, I would like to point out that the European Securities and Markets Authority should be staffed in such a way as to enable it to actually carry out its tasks efficiently and not by a relatively small staff of ESMA employees who are expected to perform almost superhuman tasks.

We should be completely open with regard to the forthcoming major reform of the credit rating agencies and today, we should discuss what seems to be almost impossible or hard to imagine. After all, special purpose entities in which banks deposited their junk bonds received the highest credit rating from the credit rating agencies. Thus, in the major revision, we should consider creating a European public rating agency and changing and examining the payment model. Finally, we should, of course, consider whether there is a need for a second rating. We need a serious, robust form of regulation so that it cannot happen again that three large agencies can bear so much of the responsibility for this current sorry financial situation.

  Seán Kelly (PPE). – Mr President, this reminds me of a phrase in Latin that goes quis custodiet custodes, who will guard the guards? The same is true here. Who is going to rate the credit agencies? Thankfully, we now have an instrument that will do that and, certainly, the credit rating agencies have brought no credit on themselves; rather; they have discredited themselves by their behaviour over the last couple of years and they have exacerbated the financial situation rather than alleviate it.

So I am delighted that the European Parliament and our authorities are taking control of the situation and I compliment Mr Gauzès, Mr Barnier and the Council for putting in place an instrument that will deal with this. I am certainly looking forward to tomorrow’s vote on this and, if I am given the opportunity, I will vote three or four times to bring these vultures under control.

  Zigmantas Balčytis (S&D). – (LT) Firstly, I would like to congratulate the rapporteur on the preparation of this very important document. To date, much has been done as regards the creation of a system for financial control and its operation in the European Union. Credit rating agencies play a very important role as they have a direct impact on the operation of the financial system, its soundness and stability. I feel that one major problem is the fact that the EU financial supervisory authorities being set up do not yet have real powers which would enable them to have a direct impact and to take binding decisions. I therefore support the proposals giving one of the European supervisory authorities, in this case, the European Securities and Markets Authority, greater powers to ensure and monitor the transparency of the work of credit rating agencies certified by the EU in order to avoid distortions of the principles of the financial market and the single internal market.

  Csanád Szegedi (NI). – (HU) Mr President, ladies and gentlemen, first of all, if we wish to be honest, we must unfortunately declare that credit rating agencies are essentially subsidiaries of the international plutocracy. Through the agencies, they put pressure on countries in an attempt to influence their decisions. The greatest problem with ratings is that they are almost entirely subjective and do not offer an accurate picture of the economic condition of the countries concerned at a given moment in time. These ratings, which are a far cry from reality, clearly hinder countries in recovering from the crisis.

Meanwhile, there are, of course, objective indicators, such as the general government deficit or external and internal indebtedness. On the other hand, the establishment of an organisation, a supervisory body, which essentially provides quality control for these institutions, and thereby prevents them from giving often erroneous ratings, is a big step towards a solution. However, I would, at any rate, like to address a question to Mr Barnier regarding the ESMA: we have talked much about how it would impose various sanctions, but when will we know what these sanctions will be, what their extent will be and when they can be introduced? I thank you in advance for your reply.

  Elena Băsescu (PPE). – (RO) Mr President, the aim of the amendments suggested by Mr Gauzès’s report is to provide additional details concerning ESMA’s new powers in relation to national agencies. My view is that the remit should be defined very clearly. In addition, financial market participants should be able to identify the competent authority in the rating agencies sector.

I think that the new authority should have sole responsibility for registering and supervising existing rating agencies. They should have the opportunity to access information about the financial instruments being evaluated by competitors. At the same time, access to websites should only be given if the confidentiality of the information requested can be guaranteed.

Finally, I wish to stress the importance of a credit rating agency being registered by a competent authority and its validity throughout the whole EU.

  Gay Mitchell (PPE). – Mr President, I am pleased that this is before us here this evening. I have to say that one of the points that is very rarely made is that, until recently, the public sector in Ireland was being regulated by the private sector; it was being regulated effectively by the credit rating agencies and the markets. I am one of those who welcome the fact that we got away from the private sector and, at least, we have the shield of the ECB, the EU and the IMF in the circumstances we are in.

I might not agree with the exact package but I think it is a better position for us to be in than to be at the mercy of the credit rating agencies and the markets. The markets are supposed to be free; I think that is something we might have a debate on some other day. But, in relation to the credit rating agencies, one of those agencies was getting USD 800 million a year for rating structured finances. Their impartiality really is being called into account and, when we look back on what they did in the past and even when we look back on what they do now, I think we will look back in dismay. It is time they were called to account and I am glad that there will be stronger supervision for these bodies.

  Michel Barnier, Member of the Commission. – (FR) Mr President, I would like to respond accurately, but succinctly to all those who have spoken, to whom I give my thanks.

First, Mr Bodu, I obviously share your point of view on the risks of the issuer-pays model. I made this point myself in my speech just now. It is therefore a subject which forms part of our consultation in the future proposal, the third stage. As I said to Mr Fox and Mrs Băsescu, we will indeed also return to the matter of structured products. Mr Fox, I listened carefully to your concerns about security as regards exchanges of information, and we will keep an eye on this; we will come back to this point. We will also continue to rely on the competence of ESMA in this area. For us, this is a question of efficiency.

Mr Pittella, thank you for your encouragement. I think that it is good that, like Mr Klute and Mrs Gáll-Pelcz, you emphasise the importance of this new supervisory authority.

There are still some difficult issues to be addressed, which we have identified, and you yourself quite rightly reminded us of them: the lack of competition in this sector, the issue of rating sovereign debt, which Mr Kelly mentioned just now, and which poses a particular problem. We will take these ideas into account in the new consultation phase.

I share Mr Klinz’s view on the importance of penalties and the ability of ESMA to impose them. Mrs Regner also mentioned this point.

On the issue of third countries, Mr Klinz, the aim is to ensure that our requirements remain rigorous, and I say this also to Mr Mitchell, who mentioned Europe’s credibility with respect to these decisions which must be taken.

I am grateful to Mr Giegold for his positive assessment of the progress that we have made together today. On the subject of recruiting people to manage the European authorities, I obviously cannot provide any specific information about names at the moment, but I would like to say to you, Mr Giegold, and also to Mr Martin, that the process is now under way, that it is being conducted completely objectively, and that, as far as I am concerned, the criteria according to which the choice must be made are competence and independence.

I would also say to Mrs Regner that the agencies will gain in power. From the very first teams, they will develop in accordance with the competences that they have been and will be given. We are anxious to ensure the credibility of the agencies’ work in terms of methods and competences.

Mr Klute, thank you for your comments. You have clearly identified the problems which remain to be dealt with, and I am conscious, as I have said to several Members, that we will have to thoroughly examine these issues. That is why the idea of dealing with this issue of regulating the agencies in three stages seems to me to be constructive and positive.

Mr Balčytis, the agencies, as I have said myself, are not creating the problems. They just need to evaluate the problems properly and the thermometer needs to work properly. With regard to products, businesses and states, we have the right, considering the importance of these ratings, to expect and to take steps to obtain an evaluation or rating which is objective and credible. I think that from this point of view, Mr Balčytis, you should not underestimate the role that ESMA will play.

Finally, I would also say in response to Mr Szegedi that, regarding the level of the penalties, the specifications for ESMA in the text that you will be adopting go into detail on this, and that ESMA will apply these penalties in accordance with the proportionality principle.

Mr President, ladies and gentlemen, I thank you in advance for your vote of support for this new stage, which will show – I repeat once more – that Europe is making concrete and objective progress, that it is learning the lessons of the crisis, thanks to the support and the impetus given by the Belgian Presidency, and thanks to the support of all the groups in the European Parliament.

  Olivier Chastel, President-in-Office of the Council. – (FR) Mr President, ladies and gentlemen, first, I would like to come back to the fact that many good questions have been asked in this debate. Commissioner Barnier addressed them one by one. I would simply like to say to you that this modification, this amendment of the regulation, is a first step in granting the necessary supervisory powers to the European Securities and Markets Authority, and that, as has been said, other revisions of this regulation will take place shortly. I think that, on this issue, and on many other important issues raised today, this will truly be an opportunity to bring together the whole debate in the revision which the Commission is getting ready to propose to us.

On the same note, I would like to return for a few moments to the removal of the provisions on transparency of credit ratings and associated information, which Commissioner Barnier himself mentioned just now. I do not think that this in any way means that the European institutions do not support the idea of transparency of credit ratings – quite the contrary. However, at this stage, when a decision is being taken, the best solution was to coordinate ourselves in advance on the basis of developments on the international stage, in order not to affect the competitiveness of the European markets. For the moment, therefore, better solutions to this issue are still being researched, discussed and developed, and we think that the best political compromise is the one on which you will be voting tomorrow.

In conclusion, I would like to repeat that this is an important step, as many of you have stressed, which will help to improve the stability of the financial markets and which will support the development of a more effective supervisory framework.

  Jean-Paul Gauzès, rapporteur. – (FR) Mr President, Mr Chastel, Mr Barnier, after the comments that you have heard, you can draw two conclusions.

The first is that Parliament will overwhelmingly support this report tomorrow, which will show once again that Parliament, or a large majority of it, appreciates the actions on regulation and supervision that are being taken by the Commission and which have been strongly supported by the Belgian Presidency.

The second conclusion that we can draw is that I will not come to a conclusion today, but that a new debate will open up, on the basis of this consultation, of Mr Klinz’s own-initiative report, to examine all these difficult questions.

Thus, we cannot avoid the fact that in 2009, when we brought about the first regulation, we were already asking ourselves these questions. If we have not dealt with these questions, it is because we have not found an appropriate response. I hope, therefore, that, thanks to the thought that is being given to the matter with the submission of Mr Klinz’s report, the discussion about consultation which is taking place will this time enable us to provide responses to complete the regulation on rating agencies.

In conclusion, however, if you will allow me, I will repeat a phrase by the President of the Securities and Markets Authority, who said that, at the very least, it would be good if the financial markets detoxified themselves of the rating agencies to allow investors to gain a greater personal appreciation of situations and risks. I think that that would also be a guarantee.

  President. – The debate is closed.

The vote will take place tomorrow (Wednesday, 15 December 2010).

Written statements (Rule 149)

  George Sabin Cutaş (S&D), in writing. – (RO) As a result of underestimating the credit risk, credit rating agencies were one of the factors that triggered the global financial crisis. On the other hand, there is no real competition in the credit rating agency sector. This situation increases the danger of conflicts of interest and, by extension, of a lack of transparency and quality in terms of awarding ratings to the various financial instruments. On 1 January 2011, the regulation giving rise to the creation of the European Securities and Markets Authority will come into force. Its main power will be to supervise agencies of this kind. Introducing a mechanism for monitoring and supervising credit rating agencies at EU level is proving to be a necessity. I think that this new authority needs to exercise its mandate as soon as it is created. I would like to point out that the decision made by the United States to introduce tighter supervisory regulations has paved the way for global harmonisation.

  Alfredo Pallone (PPE), in writing. – (IT) The European Union has already implemented rules, which will come into force at the end of the year. The rules for credit rating agencies that wish to operate in the EU and thus obtain a licence include, among other things, the obligation to register themselves and to comply with specific transparency and ‘good behaviour’ rules. I do not believe that these rules are strict enough, and I welcome the further measure that we are discussing within the Committee on Economic and Monetary Affairs. These agencies currently have a great deal of power; they can plunge a State and/or even a system (downgrading countries and causing a chain reaction of fear on the world markets) into crisis with one of their ratings. Their work is important in terms of guaranteeing reliability and stability, but there are doubts as to the rules and the criteria on which their ratings are based. Mr Gauzès’s report, which proposes bringing credit rating agencies under the supervision of the European Securities and Markets Authority, is therefore along the right lines.